GBP/USD: The best guess of where cable will be in 20 years’ time is 1.50 – SocGen
|Kit Juckes, Chief Global FX Strategist at Société Générale, was asked for a 20 to 30-year view of the GBP/USD exchange rate. He believes that cable could trade as high as 1.50.
Central Bank independence changes everything
“With the Bank of England and Federal Reserve both operating as independent, inflation-targeting central banks, that much-maligned measure of currency ‘fair value, Purchasing Power Parity (PPP) provides the most credible framework for thinking about the GBP/USD outlook.”
“Brexit will continue to throw spanners into the wheels of the UK economy. But the MPC will go on targeting inflation and that probably matters more for sterling.”
“GBP/USD PPP is a whisker below 1.50. That’s as good a guess of where GBP/USD will be in 20-30 years’ time as any, and a lot more reasonable than some.”
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